Home of Guiding Hands Corporation and Affiliates · Home of Guiding Hands Corporation and Affiliates ... financial statements in accordance with accounting principles generally accepted

Home of Guiding Hands Corporation and Affiliates

Consolidated Financial Statementsand Supplementary Schedules

Years Ended June 30, 2016 and 2015


Contents

2

Independent Auditors’ Report 3-4

Consolidated Financial Statements

Consolidated Statements of Financial Position 5-6

Consolidated Statements of Activities 7-8

Consolidated Statements of Functional Expenses 9-10

Consolidated Statements of Cash Flows 11

Notes to Consolidated Financial Statements 12-29

Additional Information

Consolidating Statements of Financial Position 31-32

Consolidating Statements of Activities 33-34

Supplementary Awards Information

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards 36-37

Independent Auditors’ Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance 38-39

Consolidated Schedule of Expenditures of Federal Awards 40

Notes to Consolidated Schedule of Expenditures of Federal Awards 41

Consolidated Schedule of Findings and Questioned Costs 42-43

10616 Scripps Summit Court ■ San Diego, CA 92131 Main: 858.795.2000 ■ Fax: 858.795.2001 ■ www.mhmcpa.com

Independent Auditors’ Report

To the Audit Committee Home of Guiding Hands Corporation and Affiliates El Cajon, California

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Home of Guiding Hands Corporation and Affiliates (the “Organization”), a nonprofit corporation, which comprise the consolidated statements of financial position as of June 30, 2016 and 2015, and the related consolidated statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Home of Guiding Hands Corporation and Affiliates as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matters

Supplemental Information

Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying consolidated schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. In addition, the consolidating statements of financial position of Home of Guiding Hands Corporation and Affiliates as of June 30, 2016 and 2015, and the related consolidating statements of activities for the years then ended, is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated September 28, 2016 on our consideration of the Organization’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control over financial reporting and compliance. San Diego, California September 28, 2016

Home of Guiding Hands Corporationand Affiliates

Consolidated Statements of Financial PositionJune 30, 2016 and 2015

June 30, 2016 2015

Assets

Current AssetsCash and cash equivalents 938,246$ 2,378,555$ Investments 825,758 943,147 Accounts receivable, net 1,506,832 1,510,092 Contributions receivable - 60,565 Prepaid expenses and other current assets 86,856 87,289 Resident trust funds 152,680 135,574

Total current assets 3,510,372 5,115,222

Property and Equipment, net 10,257,298 8,775,699

Other AssetsInvestments held for long-term purposes 4,885,016 5,034,580 Investments held by others 274,249 292,952 Beneficial interest in perpetual trust 121,656 - Deposits 80,416 73,634 Intangible assets, net 197,010 205,010 Other 29,973 32,599

Total other assets 5,588,320 5,638,775

Total assets 19,355,990$ 19,529,696$

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Consolidated Statements of Financial PositionJune 30, 2016 and 2015

June 30, 2016 2015

Liabilities and Net Assets

Current LiabilitiesCurrent portion of long-term debt 383,465$ 329,613$ Accounts payable 339,972 686,908 SPA funds payable 32,508 1,466,331 Accrued expenses and other current liabilities 1,139,491 1,167,522 Resident trust liability 152,680 135,574

Total current liabilities 2,048,116 3,785,948

Long-Term Debt, net of current portion 6,482,875 5,690,009

Refundable Advances 1,037,000 1,037,000

Total liabilities 9,567,991 10,512,957

Net AssetsUnrestrictedDesignated by Board for endowment purposes 5,159,265 5,327,532 Designated by Board for Capital Campaign 228,758 351,755 Undesignated 4,120,115 3,230,801

Unrestricted 9,508,138 8,910,088

Temporarily restricted 158,205 106,651

Permanently restricted 121,656 -

Total net assets 9,787,999 9,016,739

Total liabilities and net assets 19,355,990$ 19,529,696$

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statement of ActivitiesYear Ended June 30, 2016

Temporarily Permanently

Unrestricted Restricted Restricted Total

Support and RevenueMediCal revenue $ 10,277,759 $ - $ - 10,277,759$ San Diego Regional Center 7,602,800 - - 7,602,800 Investment return 11,568 - - 11,568 Contributions 169,967 109,097 121,656 400,720 Contributions related to capital campaign 496,070 - - 496,070 Contributions related to special events 161,153 108,534 - 269,687 Special events 116,337 - - 116,337 HUD rent 92,714 - - 92,714 SPA administrative income 124,152 - - 124,152 Grants 1,000 123,462 - 124,462 Other income 24,037 - - 24,037 Net assets released from restrictions,

satisfaction of program restrictions 289,539 (289,539) - -

Total support and revenue 19,367,096 51,554 121,656 19,540,306

ExpensesProgram services

Residential 12,152,801 - - 12,152,801 Community living and respite 4,248,592 - - 4,248,592

Supporting servicesGeneral and administrative 1,775,175 - - 1,775,175 Fundraising

Other 396,822 - - 396,822 Special events 195,656 - - 195,656

Total expenses 18,769,046 - - 18,769,046

Change in net assets 598,050 51,554 121,656 771,260

Net assets at beginning of year 8,910,088 106,651 - 9,016,739

Net assets at end of year 9,508,138$ 158,205$ 121,656$ 9,787,999$

The accompanying notes are an integral part of this consolidated financial statement.

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Consolidated Statement of ActivitiesYear Ended June 30, 2015

Temporarily

Unrestricted Restricted Total

Support and RevenueMediCal revenue $ 9,762,384 $ - 9,762,384$ San Diego Regional Center 6,513,964 - 6,513,964 Investment return 65,543 - 65,543 Contributions 234,085 73,610 307,695 Contributions related to special events 174,914 61,541 236,455 Special events 95,892 - 95,892 HUD rent 89,785 - 89,785 SPA administrative income 32,251 - 32,251 Grants 1,000 516,076 517,076 Other income 17,717 276 17,993 Gain on sale of property and equipment 2,732 - 2,732 Net assets released from restrictions,

satisfaction of program restrictions 721,350 (721,350) -

Total support and revenue 17,711,617 (69,847) 17,641,770


Residential 11,950,724 - 11,950,724 Community living and respite 3,413,433 - 3,413,433

Supporting servicesGeneral and administrative 1,614,497 - 1,614,497 Fundraising

Other 252,347 - 252,347 Special events 203,849 - 203,849

Total expenses 17,434,850 - 17,434,850

Change in net assets 276,767 (69,847) 206,920

Net assets at beginning of year 8,633,321 176,498 8,809,819

Net assets at end of year 8,910,088$ 106,651$ 9,016,739$


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Consolidated Statement of Functional ExpensesYear Ended June 30, 2016

Other Program General andResidential Services Administrative Fundraising Total

Salaries and wages 7,502,653$ 2,631,397$ 1,054,392$ 194,434$ 11,382,876$ Payroll related expenses 1,734,975 471,994 176,579 25,053 2,408,601 Facilities 925,503 147,152 141,070 21,037 1,234,762 Supplies 780,730 32,029 53,822 5,974 872,555 Transportation 251,969 675,959 9,315 1,602 938,845 Purchased services 244,909 175,147 186,139 - 606,195 Interest 245,357 - 5,936 - 251,293 Other 126,404 28,754 135,157 147,931 438,246 Depreciation and amortization 318,944 86,160 12,765 791 418,660 Special events - - - 195,656 195,656 In-kind 21,357 - - - 21,357

12,152,801$ 4,248,592$ 1,775,175$ 592,478$ 18,769,046$

64.7% 22.6% 9.5% 3.2% 100%


Program Services Supporting Services

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Consolidated Statement of Functional ExpensesYear Ended June 30, 2015

Other Program General andResidential Services Administrative Fundraising Total

Salaries and wages 7,302,537$ 2,068,420$ 956,033$ 136,293$ 10,463,283$ Payroll related expenses 1,705,299 409,230 158,847 14,938 2,288,314 Facilities 945,678 143,681 95,909 19,865 1,205,133 Supplies 789,526 26,431 37,470 8,798 862,225 Transportation 254,668 575,762 11,029 3,724 845,183 Purchased services 275,491 129,450 177,514 1,780 584,235 Interest 252,586 - 1,214 - 253,800 Other 113,086 5,448 170,259 66,017 354,810 Depreciation and amortization 297,550 55,011 6,222 932 359,715 Special events - - - 203,849 203,849 In-kind 14,303 - - - 14,303

11,950,724$ 3,413,433$ 1,614,497$ 456,196$ 17,434,850$

68.5% 19.6% 9.4% 2.6% 100.0%


Program Services Supporting Services

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Consolidated Statements of Cash FlowsYears Ended June 30, 2016 and 2015

2016 2015

Cash Flows from Operating ActivitiesChange in net assets 771,260$ 206,920$ Adjustments to reconcile change in net assets

to net cash provided by (used in) operating activities:Unrealized and realized (gain) loss on investments 117,949 83,901 Depreciation and amortization on property and equipment 408,034 349,089 Amortization of intangible assets 8,000 8,001 Amortization of debt financing costs 2,626 2,625 Non-cash grant - (373,230) Non-cash contribution of perpetual trust (121,656) - Non-cash contribution of stock (153,612) - (Gain) loss on sale of assets - (2,732)

(Increase) decrease in operating assets:Accounts receivable 3,260 (256,632) Contributions receivable 60,565 (60,565) Prepaid expenses and other current assets 433 634

Deposits (6,782) 1,610 Increase (decrease) in operating liabilities:

Accounts payable (346,936) 136,553 SPA funds payable (1,433,823) 1,387,709 Accrued expenses and other current liabilities (28,031) 39,382

Net cash provided by (used in) operating activities (718,713) 1,523,265

Cash Flows from Investing ActivitiesProceeds from sales of investments 3,899,563 6,368,016 Purchases of investments (3,578,244) (6,526,407) Purchases of property and equipment (684,446) (134,230) Proceeds from sale of fixed assets - 2,732

Net cash used in investing activities (363,127) (289,889)

Cash Flows from Financing ActivitiesRepayment of long-term debt (358,469) (329,027)

Net cash used in financing activities (358,469) (329,027)

Net change in cash (1,440,309) 904,349

Cash and cash equivalents at beginning of year 2,378,555 1,474,206

Cash and cash equivalents at end of year 938,246$ 2,378,555$

Supplemental Disclosures of Cash Flow Information:Interest paid during the year 223,354$ 192,376$

Non-cash Investing & Financing Activities:During fiscal 2016, the Organization acquired a building amounting to $1,668,558 through the acquisition of long-term debt of $1,168,000 and cash payments of $500,558.

During fiscal 2016, the Organization acquired vans amounting to $46,944 through the acquisition of long-term debt of $37,186 and cash payments of $9,758.

During fiscal 2015, the Organization acquired buses amounting to $373,230 through a grant.

During fiscal 2015, the Organization acquired vans amounting to $67,809 through the acquisition of long-term debt of $54,240 and cash payments of $13,569.

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements

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1. Organization and Summary of Significant Accounting Policies

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.

Nature of activities

Home of Guiding Hands Corporation (“Corporation”) is a nonprofit public benefit corporation established in 1961 to provide residential care and services to persons with developmental disabilities. Anja House (“Anja”) and Aquilla House (“Aquilla”) are nonprofit public benefit corporations established in 2003 to provide disabled persons with housing facilities and services. For purposes of the notes to the consolidated financial statements, the Corporation, Anja and Aquilla are collectively referred to as the “Organization.”

Capital campaign fund

In May 2013, the Board approved the establishment of a Capital Campaign Fund to acquire funds to be used to build or purchase a new center for the Organization. The Center is expected to consolidate various functions that are currently conducted at separate locations throughout San Diego, including administrative office space, meeting and training space, program sites, and transportation and maintenance facilities. The Capital Campaign Fund was initially invested in marketable securities (see Note 1, Investments and investments held by others, below). As of June 30, 2016 the Capital Campaign Fund invests in money market funds. The Fund and had a balance of $228,758 and $351,755 as of June 30, 2016 and 2015, respectively, which includes funds transferred from the general investment and board designated endowment account as well as unrestricted contributions from donors. The balance of the Capital Campaign Fund is included in Investments in the consolidated statement of financial position.

Method of accounting

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting.

Principles of consolidation

The consolidated financial statements include the accounts of Home of Guiding Hands Corporation, Anja House, and Aquilla House. All significant inter-organization accounts and transactions have been eliminated.

Use of estimates

The preparation of consolidated financial statements in conformity with standards generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported



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Use of estimates, cont’d

amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates used in preparing these consolidated financial statements include the functional allocation of expenses and allowance for doubtful accounts.

Financial statement presentation

The Organization’s financial statement presentation is in accordance with authoritative guidance for Not-For-Profit Entities. The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted.

Unrestricted net assets represent expendable funds available for operations, which are not otherwise limited by donor restrictions.

Temporarily restricted net assets consist of contributed funds subject

to donor-imposed restrictions contingent upon specific performance of a future event or a specific passage of time before the Organization may spend the funds.

Permanently restricted net assets are subject to irrevocable donor restrictions requiring that the assets be maintained in perpetuity usually for the purpose of generating investment income to fund current operations.

Reclassification Certain amounts in the 2015 consolidated financial statements have been reclassified to conform with the 2016 classifications. The reclassifications have no effect on total net assets.

Cash and cash equivalents

The Organization considers highly liquid investments, including money market funds, to be cash and cash equivalents. At June 30, 2016 and 2015, the Organization had restricted cash of $20,962 and $21,688 respectively, under its contract with the U.S. Department of Housing and Urban Development.

Accounts receivable

Accounts receivable arise in the normal course of business. Receivables are written-off in the period deemed uncollectible. It has been the policy of management to review the outstanding accounts receivable at year end, as well as the bad debt write-offs experienced in the past to establish an allowance for doubtful accounts for uncollectible amounts. Accounts receivable is recorded net of a $20,000 allowance for doubtful accounts as of June 30, 2016 and 2015.



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Contributions receivable

Unconditional promises to give cash and other assets are recognized as contribution revenue and receivables in the period in which the promise is received. Depending on the existence and nature of the donor-imposed restrictions, unconditional promises to give are reported either as unrestricted support that increases unrestricted net assets or as restricted support that increases permanently or temporarily restricted net assets. Pledges that are expected to be collected within one year are recorded at their net realizable value. Pledges that are expected to be collected in future years are discounted to their estimated net present value. After pledges are originally recorded, an allowance for uncollectible pledges may be estimated based on specific circumstances. No allowance has been made for the years ended June 30, 2016 or 2015.

Investments and investments held by others

Investments are accounted for in accordance with authoritative guidance. Under the provisions of the guidance, investments in equity securities with readily determinable fair market values and all debt securities should be reported at fair value with realized and unrealized gains and losses included in the consolidated statements of activities. Investments consist of marketable securities and alternative investments and are accounted for as follows: Marketable securities consist of mutual funds, money market funds and common stock and are recorded at fair market value. The fair values of investments in securities traded on national exchanges are valued at the closing price on the last business day of the fiscal year. Realized gains or losses on the sale of marketable securities are calculated using the specific-identification method. Unrealized gains and losses represent the change in the fair market value of the individual investments for the year or since the acquisition date, if acquired during the year, and are recorded as a component of unrestricted net assets. The Organization has the capability to borrow on margin on investment accounts should the need arise. The Organization did not have any borrowings outstanding as of June 30, 2016 and 2015. The Organization has investments held by The San Diego Foundation. These investments are Board designated funds and are considered unrestricted. The Organization has legally enforceable rights and claims to such assets, including the sole right to income generated from these assets. The



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Investments and investments held by others, cont’d

Organization receives an annual distribution of investment earnings for the year, less any fees on the investments. Investments held by others are invested in the endowment balanced pool at The San Diego Foundation and are valued at the Organization’s percentage interest in the total endowment balanced pool. At June 30, 2016, this pool was diversified approximately as follows: 25.7% domestic equity, 22.2% international equity, 15.8% alternative investments, 10.1% domestic fixed income, 8.1% real estate funds, 7% international fixed income, 6.2% Global equities, 4.2% Commodities and 0.5% cash. These are not insured investments and are subject to all of the risks inherent in investing in stocks, bonds, real estate, and alternative investments, including the risk of principal loss. The marketable securities in the underlying assets in the pool are valued at fair value as described above. The fair value of alternative investments in the pool, for which quoted market prices are not available, are determined by investment managers in good faith using methods considered appropriate, and are subject to oversight and review by management.

Fair value measurements

In accordance with authoritative guidance, the Organization measures fair value at the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market and participants at the measure date. Authoritative guidance establishes a hierarchy for ranking the quality and reliability of the information used to determine fair values. A summary of the fair value hierarchy under the authoritative guidance is described in Note 5.

Property and equipment

Acquisitions of property and equipment of $5,000 or more are capitalized. Property and equipment are stated at cost, or if donated, at the approximate fair market value on the date of donation. Expenditures for maintenance and repairs are charged against operations. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, ranging from 3 to 40 years, or, in the case of leasehold improvements, over the lesser of the useful lives of the related assets or the lease term.



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Intangible assets

Intangible assets consist of the discounted future interest savings on two home mortgages acquired in the acquisition of the Charles I. Cheneweth Foundation. The assets are being amortized on a straight-line basis over the estimated useful lives, which management has determined to be 29 years. The estimated amortization expense is approximately $8,000 in each of the following five years and totals approximately $157,000 thereafter.

Revenue and support

The Organization’s contributions are recorded in accordance with authoritative guidance whereby contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. Under the authoritative guidance, contributions received that have temporary restrictions as to their use are reported as temporarily restricted support and are then reclassified to unrestricted support upon fulfillment of the restriction.

Contributed materials and services

Contributed materials are recorded at their fair market value, where an objective basis is available to measure their value. Such items are capitalized or charged to operations as appropriate. Certain contributed items are auctioned at the Organization’s special events. The revenue from the auction of contributed items is considered unrestricted and is used to provide program services. During fiscal 2015 the Organization received six buses through a CalTrans 5310 Grant and must comply with certain restrictions for their use that continue until a specified number of miles or number of years has passed. If fair market value drops below $5,000 at any time prior to reaching mileage or year of service, full title may be released to the Organization. If the Organization fails to comply, it may be required that vehicles be returned. The Organization receives a substantial amount of services donated by volunteers in carrying out the Organization’s program services. No amounts have been recorded for those services, as they do not meet the requirements for recognition as contributions in the consolidated financial statements. In 2003, the Organization received two interest-free capital advances from a governmental agency, U.S. Department of Housing and Urban Development (“HUD”), for the purchase of property held by Anja House and Aquilla House. The loans are not required to be repaid as long as the houses remain available to eligible low income persons with disabilities for a period of 40 years. The capital advances are secured by deeds of trust and are reflected in the consolidated statements of financial position as refundable advances. The



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Contributed materials and services, cont’d

donated interest has been recognized at the market interest rate on the issuance date of the loan and is included in contributions and in-kind expenses.

Income taxes The Organization is exempt from income taxes under Section 501(c) (3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. The Organization, however, may be subject to tax on income which is not related to its exempt purpose. The Organization had no unrelated business income tax for the years ended June 30, 2016 and 2015.

At June 30, 2016, the federal statute of limitation remains open for the 2013 through 2016 tax years. The statute of limitations for the state income tax returns remains open for the 2012 through 2016 tax years.

State plan amendment funds

During the year ended June 30, 2011 the Centers for Medicare and Medicaid Services notified the state of California that formal approval of the state plan amendment (“SPA”) affecting day program and transportation services would be forthcoming making changes, retroactive to July 2007, for day program and transportation services. In accordance with the SPA, the San Diego Regional Center is required to request funds from the Centers for Medicare and Medicaid Services on behalf of the Organization for day program and transportation services rendered to its residents during fiscal years 2008 to 2016 which are to be paid to the Organization and then forwarded to San Diego Regional Center within 30 days of receipt of funds. A 6% Quality Assurance Fee is included in SPA payment and must be reported monthly and sent quarterly to the Department of Healthcare Services. The Organization is to receive an administrative income of 1.5% of total funds received from the Centers for Medicare and Medicaid Services.

Balances included in the consolidated statements of financial position and consolidated statements of activities related to SPA funds are presented net in accordance with authoritative guidance as the funds received with the exception of the Organization’s 1.5% administrative income will be transferred to the San Diego Regional Center and Department of Healthcare Services. As of June 30, 2016 and 2015, respectively, the Organization had $334,998 and $1,511,377 in cash and cash equivalents and SPA funds payable of $242,519 and $1,535,189 in the consolidated statements of financial position which represent amounts received from the SPA program which are payable to the San Diego Regional Center and Department of Healthcare Services. Included in accounts receivable in the consolidated statements of financial position as of June 30, 2016 and 2015, respectively, is $3,150 and $1,033 which represent the amounts owed to the Organization for



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State plan amendment funds, cont’d

administrative services performed in relation to the SPA program. SPA administrative income included in the consolidated statement of activities for the years ended June 30, 2016 and 2015, respectively, amounted to $124,152 and $32,251 which represent the Organization’s 1.5% administrative income for funds received or to be received for day program and transportation services and related QAF rendered during fiscal years 2016 and 2015 and related to prior period adjustments.

2. Concentrations

The Organization maintains its cash in bank deposit accounts. The Federal Deposit Insurance Corporation insures funds on deposit. At times, balances may exceed federally insured limits. The Organization has not experienced any losses in its deposit accounts. Management believes that the Organization is not exposed to any significant credit risk with respect to its cash.

Accounts receivable include $1,427,582 and $1,459,388 due from Medi-Cal and the San Diego Regional Center at June 30, 2016 and 2015, respectively.

All receivables are unsecured and, thus, subject to credit risk.

Approximately 83% and 93% of the Organization’s support and revenue came from Medi-Cal through the State of California’s Department of Healthcare Services and the San Diego Regional Center through the State of California’s Department of Developmental Services for the years ended June 30, 2016 and 2015, respectively.

3. Functional Allocation of Expenses

The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

Other program services in the consolidated statement of functional expenses for the years ended June 30, 2016 and 2015 include: community living and respite services, transportation services, early childhood development services, integrated therapies clinics, life planning and counseling services.

4. Resident Trust Funds

The Organization holds funds in trust for residents living in its homes to pay personal expenses on the residents’ behalf. These funds are, and are required to be, held in separate bank accounts. A corresponding liability has been recorded in the accompanying consolidated statements of financial position.



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5. Fair Value Measurements

Authoritative guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted market prices for identical assets or liabilities in active markets.

Level 2: Unadjusted quoted market prices for similar assets and liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3: Significant unobservable inputs for the asset or liability.

The following table summarizes the valuation of the Organization’s financial instruments in accordance with authoritative guidance at June 30, 2016:

Level 1 Level 3 Total Money Market $ 283,235 $ - $ 283,235 Mutual Funds: Fixed Income 1,791,516 - 1,791,516 International Fixed Income 528,206 - 528,206 International Equities 809,440 - 809,440 Large Cap 132,296 - 132,296 Mid Cap 77,295 - 77,295 Real Estate 326,203 - 326,203 Small Cap 488,980 - 488,980 Common Stock: Energy 88,695 - 88,695 Materials 44,045 - 44,045 Industrials 134,718 - 134,718 Consumer Discretionary 171,176 - 171,176 Consumer Staples 143,373 - 143,373 HealthCare 180,839 - 180,839 Financials 165,689 - 165,689 Information Technology 274,567 - 274,567 Telecommunication

services 35,424 - 35,424 Utilities 43,167 - 43,167 Investments Held by Others - 274,249 274,249 Beneficial Interest in

Perpetual Trust - 121,656 121,656 $ 5,718,864 $ 395,905 $ 6,114,769



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5. Fair Value Measurements, Cont’d

The following table summarizes the reconciliation of the beginning and ending balances for each major Level 3 category of the Organization’s financial instruments in accordance with authoritative guidance at June 30, 2016:

Investments Held by Others

Beneficial Interest in Perpetual Trust Total

Balance at June 30, 2015 $ 292,952 $ - $ 292,952 Contribution - 121,656 121,656 Distribution (12,733) - (12,733) Change in value (5,970) - (5,970) Balance at June 30, 2016 $ 274,249 $ 121,656 $ 395,905

The following table summarizes the valuation of the Organization’s financial instruments in accordance with authoritative guidance at June 30, 2015:

Level 1 Level 3 Total Money Market $ 43,609 $ - $ 43,609 Mutual Funds: Fixed Income 1,936,871 - 1,936,871 International Fixed Income 564,555 - 564,555 International Equities 903,759 - 903,759 Large Cap 181,635 - 181,635 Mid Cap 86,690 - 86,690 Real Estate 342,228 - 342,228

Small Cap 549,896 - 549,896 Common Stock: Energy 99,194 - 99,194 Materials 46,290 - 46,290 Industrials 148,374 - 148,374 Consumer Discretionary 178,024 - 178,024 Consumer Staples 141,219 - 141,219 HealthCare 206,196 - 206,196 Financials 206,246 - 206,246 Information Technology 275,806 - 275,806 Telecommunication services 31,302 - 31,302

Utilities 39,295 - 39,295 Investments Held by Others - 292,952 292,952 $ 5,981,189 $ 292,952 $ 6,274,141



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5. Fair Value Measurements, Cont’d

The following table summarizes the reconciliation of the beginning and ending balances for each major Level 3 category of the Organization’s financial instruments in accordance with authoritative guidance at June 30, 2015:

Investments Held by Others Balance at June 30, 2014 $ 302,695 Distribution (10,225) Change in value of investments held by others 482 Balance at June 30, 2015 $ 292,952

6. Investments Investments consisted of the following:

June 30, 2016 2015 Money Market $ 275,145 $ 40,147 Mutual Funds: Fixed Income 1,791,516 1,936,871 International Fixed Income 528,206 564,555 International Equities 809,440 903,759 Large Cap 132,296 181,635 Mid Cap 77,295 86,690 Real Estate 326,203 342,228 Small Cap 488,980 549,896 Common Stock: Energy 88,695 99,194 Materials 44,045 46,290 Industrials 134,718 148,374 Consumer Discretionary 171,176 178,024 Consumer Staples 143,373 141,219 HealthCare 180,839 206,196 Financials 165,689 206,246 Information Technology 274,567 275,806 Telecommunication services 35,424 31,302 Utilities 43,167 39,295 Investments held by others 274,249 292,952 Beneficial Interest in Perpetual Trust 121,656 - $ 6,106,679 $ 6,270,679



22

6. Investments, Cont’d

Investment return for the years ended June 30, 2016 and 2015 included in the consolidated statements of activities is comprised of the following:

2016 2015 Unrealized and realized gain (loss) $ (117,949) $ (83,901) Interest and dividends 158,279 169,524 Investment expenses (28,762) (20,080) $ 11,568 $ 65,543

7. Property and Equipment

Property and equipment consisted of the following:

June 30, 2016 2015 Land $ 3,304,604 $ 3,304,604 Building and improvements 9,902,683 8,159,468 Vehicles 973,558 927,076 Software 36,730 36,730 Other equipment

Construction-In-Progress 76,267 99,936

76,267 -

Furniture and fixtures 5,952 5,952 14,399,730 12,510,097 Less accumulated depreciation and amortization (4,142,432) (3,734,398) $ 10,257,298 $ 8,775,699

Depreciation and amortization expense was $408,034 and $349,089 for the years ended June 30, 2016 and 2015 respectively.

During 2016 the Organization purchased two vans valued at $46,944 through issuance of long term debt of $37,186 (see Note 9) and down payment of $9,758. During 2016 the Organization acquired a building through issuance of long term debt of $1,168,000 (see Note 9) and a down payment of $500,558.

During 2015 the Organization purchased three vans valued at $67,809 and received six buses from a CalTrans grant worth $373,230 (see Note 11).

8. Line of Credit

In October 2014 the maturity date of the existing line of credit was extended until October of 2016 for the $1,300,000 line of credit with a bank. Interest is payable monthly at the bank’s prime rate up to a maximum of 5.5% per annum. The lines mature on October 29, 2016. The line is collateralized by a separate account at Charles Schwab. There were no outstanding balances on the lines of credit as of June 30, 2016 and 2015. In July 2016, the line of credit was increased to $2,500,000 and the maturity date was extended until October of 2018 (See Note 17).



23

8. Line of Credit, Cont’d

In November 2014 the Organization entered into an agreement with a bank for a vehicle line of credit in the amount of $150,000, which expires in November 2016. Individual 3-year term promissory notes are issued at the time of purchase for each vehicle which serves as collateral. Payments on each note including interest at 6.25% are made monthly. There was no outstanding balance on the vehicle line of credit as of June 30, 2016 and 2015, respectively.

The Organization is subject to compliance with certain debt covenants under the line of credit. Management believes that the Organization was in compliance with the debt covenants at June 30, 2016.

9. Long-Term Debt

June 30, 2016 201530 mortgages payable in aggregate monthly payments of $42,946 including interest at rates ranging from 3.00% to 4.00% per annum; secured by deeds of trust; due at various dates from February 2021 through March 2043.

$ 5,649,104

$ 5,960,584

One mortgage payable with an aggregate monthly payment of $6,202 including interest at a rate of 4% per annum; secured by deed of trust; due February 2021. 1,158,060 -

Six vehicle loans with aggregate monthly payments of $3,323, including interest rates of 6% and 6.25%; due November 2016 through October 2018. 59,176 59,038

6,866,340 6,019,622

Less current portion (383,465) (329,613) $ 6,482,875 $ 5,690,009

The Organization is subject to compliance with certain debt covenants and amounts due under the mortgage payable are callable before maturity by the lender under certain subjective acceleration clauses of the underlying agreement, including changes deemed to be materially adverse by the lender. Management believes that the Organization was in compliance with the debt covenants at June 30, 2016.



24

9. Long-Term Debt, Cont’d

Future principal payments on long-term debt are due as follows:

Year Ending June 30, 2017 $ 383,466 2018 385,621 2019 380,240 2020 389,704 2021 1,410,113 Thereafter 3,917,196 Total $ 6,866,340

10. Operating Leases

The Organization leases space and equipment under non-cancellable operating leases that expire at various dates through 2021. The Organization leases land from the County of San Diego under a non-cancellable operating lease that expires in February 2071. The aggregate monthly lease payments are $28,841. Total rent expense for the years ended June 30, 2016 and 2015 was approximately $234,000 and $216,000, respectively. Future minimum payments required under non-cancellable operating leases are as follows:

Year Ending June 30, 2017 $ 229,300 2018 112,200 2019 83,800 2020 78,900 2021 77,400 Thereafter 3,616,400 Total $ 4,198,000

11. In-Kind Donations

In-kind donations of $130,511 and $495,294 are included in contributions on the consolidated statements of activities for the years ended June 30, 2016 and 2015, respectively. In-kind donations are composed of the following:

Years Ended June 30, 2016 2015 Donated items $ 68,291 $ 433,074 Donated interest 62,220 62,220 $ 130,511 $ 495,294



25

12. Restrictions on Net Assets

Temporarily restricted net assets at June 30, 2016 and 2015 are available for the following purposes:

June 30, 2016 2015 Residential programs $ 143,769 $ 94,972 Other program 4,247 6,082 Tuition fund 3,259 4,657 Transportation 1,930 - Other 5,000 940 $ 158,205 $ 106,651

13. Net Assets Designated for Endowment

The Organization has a beneficial interest in two irrevocable trusts. The Organization does not have access to the fund principal. The Organization receives distributions from the endowment of investment earnings less fees with any excess amounts remaining in the endowment fund in perpetuity. Distributions from the endowment fund are recorded as unrestricted income when they become distributable. The assets in the trust consist of stocks, fixed income securities, and alternative investments and are recorded at fair value. The fair value of alternative investments, for which quoted market prices are not available, are determined by investment managers in good faith using methods considered appropriate, and is subject to oversight and review by management. The beneficial interest in the perpetual trust is recorded at the fair value, which approximates expected future cash flows from the trust. The Organization has a board restricted endowment that to date has been fully funded in accordance with Board resolutions. The income is designated for program expenses. There were no contributions to the endowment for the year ended June 30, 2016 or June 30, 2015. It is the Organization’s intention to transfer up to 50% of all undesignated bequests, depending on the amount, to the endowment and retain the principal in perpetuity. The endowment is included in unrestricted board designated net assets on the consolidated statements of financial position. The Organization’s endowment investment policy and strategy is to emphasize total return that is the aggregate return from capital appreciation and dividend and interest income. Within this framework, specific investment objectives for endowment investments include preservation of capital, long-term growth of capital, liquidity, and preservation of purchasing power.



26

13. Net Assets Designated for Endowment, Cont’d

Authoritative guidance requires the Organization to classify a portion of a donor-restricted endowment fund of perpetual duration as permanently restricted net assets. Specifically, the portion classified as permanently restricted shall be (a) the amount of the fund that must be retained permanently per explicit donor stipulations or (b) in the absence of such stipulations, the amount which the Organization’s board determines must be retained (preserved) permanently consistent with the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”). The Organization interprets UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to invest or appropriate donor-restricted endowment funds:

(1) The duration and preservation of the fund (2) The purposes of the organization and the donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and the appreciation of investments (6) Other resources of the organization (7) The investment policies of the organization

Through the Board’s interpretation of the law, the Organization has determined that the provisions do not apply to the irrevocable trusts.



27


Endowment net asset composition by type of fund as of June 30, 2016 were as follows:

Unrestricted Permanently Restricted Total

Donor restricted endowment fund $ - $ 121,656 $ 121,656

Board designated endowment fund

4,885,016

- 4,885,016

Investments held by others 274,249 - 274,249

Total endowment funds $ 5,159,265 $ 121,656 $ 5,280,921

Changes in endowment assets for year ended June 30, 2016 were as follows: Endowment assets July 1, 2015 $ 5,327,532Interest and Dividends (net of fees) 114,271Transfer to Non Endowment Account (166,000)Contributions to the donor restricted endowment fund 121,656Net appreciation/depreciation (97,835)Change in value of investments held by others (18,703)Endowment assets June 30, 2016 $ 5,280,921

Endowment net asset composition by type of fund as of June 30, 2015 were as follows:

Unrestricted Permanently Restricted Total

Board designated endowment fund $ 5,034,580 $ - $ 5,034,580

Investments held by others 292,952 - 292,952

Total endowment funds $ 5,327,532 $ - $ 5,327,532



28


Changes in endowment assets for year ended June 30, 2015 were as follows:

Endowment assets July 1, 2014 $ 4,766,702Interest and dividends (net of fees) 117,322Transfer from non-endowment account 500,000Net appreciation (depreciation) (46,749)

Change in value of investments held by others (9,743)Endowment assets June 30, 2015 $ 5,327,532

14. Employee Benefit Plan

The Organization has a tax-deferred annuity plan qualified under Section 403(b) of the Internal Revenue Code. In accordance with the Plan Document, eligible employees may make contributions up to the maximum amount allowed by the Internal Revenue Code. The Organization can elect to provide a matching contribution in accordance with the Plan Document. To be eligible for a matching contribution, the employee must complete at least 1,000 hours of service during the Plan year. Total contributions of $76,683 and 70,289 were made to the Plan for the years ended June 30, 2016 and 2015, respectively.

15. Collective Bargaining Agreement

All direct care residential employees, transportation employees and maintenance workers employed by the Organization are subject to a collective bargaining agreement that expires in January of 2019.

16. Commitments and Contingencies

Litigation In the normal course of business, the Organization is occasionally named as a defendant in various claims. It is the opinion of management that the outcome of any claims would not materially affect the operations or the financial position of the Organization.

Employee agreement

During the year ended June 30, 2016, the Organization signed a six year employment agreement with its CEO and President which sets forth specific compensation amounts for the CEO’s annual salary and benefits beginning July 1, 2016. The agreement is at-will, meaning that it may be terminated by either party for any reason, at any time, subject to severance compensation under certain circumstances.



29

17. Subsequent Events

The Organization has evaluated subsequent events through September 28, 2016, which is the date the consolidated financial statements were available to be issued. In July 2016, the Organization entered into an agreement with its Bank to increase the line of credit (see Note 8) to $2,500,000 to facilitate expenditures related to construction on the new building. In addition, the maturity date was extended to October 2018. Collateral for the line of credit, the pledged asset investment account was increased to meet the required covenants. The State Budget for the Fiscal Year 2016-17 and Assembly Bill ABX2-1 provided a number of rate changes and increases for all programs funded by Department of Developmental Services that the Organization operates. Rate increases range from 5% to 14.19% and are effective July 1, 2016. In most programs a portion of the rate increases are designated for direct care wages and related costs. The State Budget for the Fiscal Year 2016-17 also includes an increase for all intermediate care facility homes operated by the Organization effective August 1, 2016. Increases are facility specific and are approximately 7%. There are no restrictions on these increases. Funds held in the Capital Campaign Account at Charles Schwab are being transferred to a new Money Market Account at Torrey Pines Bank to facilitate the expected high volume of transactions and facilitate efficient coordination with the line of credit being utilized for construction costs. During July 2016, the Organization entered into an agreement with the California Department of Transportation for a two-year grant award. In accordance with the grant, the Organization will receive $984,900 and is required to pay $261,100 in matching expenses for a total award of $1,246,000. This award is to be used to acquire 13 buses, 6 accessible vans and GPS software.


Additional Information


Consolidating Statement of Financial Position

June 30, 2016

Home of Guiding Hands

Corporation Anja House Aquilla House Eliminating

Entries Consolidated

Total

Assets

Current AssetsCash and cash equivalents 914,814$ 15,767$ 7,665$ -$ 938,246$ Investments 825,758 - - - 825,758 Accounts receivable, net 1,506,105 727$ - - 1,506,832 Prepaid expenses and other current assets 86,856 - - - 86,856 Resident trust funds 152,680 - - - 152,680 Interorganization receivables 5,245 - - (5,245) -

Total current assets 3,491,458 16,494 7,665 (5,245) 3,510,372

Property and Equipment, net 9,466,529 384,470 406,299 - 10,257,298

Other AssetsInvestments held for long-term purposes 4,885,016 - - - 4,885,016 Investments held by others 274,249 - - - 274,249 Beneficial interest in perpetual trust 121,656 - - - 121,656 Deposits 80,416 - - - 80,416 Intangible assets, net 197,010 - - - 197,010 Other 29,973 - - - 29,973

Total other assets 5,588,320 - - - 5,588,320

Total assets 18,546,307$ 400,964$ 413,964$ (5,245)$ 19,355,990$


Current LiabilitiesCurrent portion of long-term debt 383,465$ -$ -$ -$ 383,465$ Accounts payable 338,530 - 1,442 - 339,972 SPA funds payable 32,508 - - - 32,508 Accrued expenses and other current liabilities 1,136,422 1,661 1,408 - 1,139,491 Resident trust liability 152,680 - - - 152,680 Interorganization payables - 4,035 1,210 (5,245) -

Total current liabilities 2,043,605 5,696 4,060 (5,245) 2,048,116

Long-Term Debt, net of current portion 6,482,875 - - - 6,482,875

Refundable Advances - 518,500 518,500 - 1,037,000

Total liabilities 8,526,480 524,196 522,560 (5,245) 9,567,991

Net AssetsUnrestricted Designated by Board for endowment purposes 5,159,265 - - - 5,159,265 Designated by Board for Capital Campaign 228,758 - - - 228,758 Undesignated 4,351,943 (123,232) (108,596) - 4,120,115

Unrestricted 9,739,966 (123,232) (108,596) - 9,508,138

Temporarily restricted 158,205 - - - 158,205

Permanently restricted 121,656 - - - 121,656

Total net assets 10,019,827 (123,232) (108,596) - 9,787,999

Total liabilities and net assets 18,546,307$ 400,964$ 413,964$ (5,245)$ 19,355,990$

See Independent Auditors' Report.

31


Consolidating Statement of Financial Position

June 30, 2015

Home of Guiding Hands

Corporation Anja House Aquilla House Eliminating

Entries Consolidated

Total

Assets

Current AssetsCash and cash equivalents 2,354,136$ 13,964$ 10,455$ -$ 2,378,555$ Investments 943,147 - - - 943,147 Accounts receivable, net 1,510,092 - - - 1,510,092 Contributions receivable 60,565 - - - 60,565 Prepaid expenses and other current assets 87,289 - - - 87,289 Resident trust funds 135,574 - - - 135,574 Interorganization receivables 606 - - (606) -

Total current assets 5,091,409 13,964 10,455 (606) 5,115,222

Property and Equipment, net 7,966,717 397,000 411,982 - 8,775,699

Other AssetsInvestments held for long-term purposes 5,034,580 - - - 5,034,580 Investments held by others 292,952 - - - 292,952 Deposits 73,634 - - - 73,634 Intangible assets, net 205,010 - - - 205,010 Other 32,599 - - - 32,599

Total other assets 5,638,775 - - - 5,638,775

Total assets 18,696,901$ 410,964$ 422,437$ (606)$ 19,529,696$


Current LiabilitiesCurrent portion of long-term debt 329,613$ -$ -$ -$ 329,613$ Accounts payable 686,908 - - - 686,908 SPA funds payable 1,466,331 - - - 1,466,331 Accrued expenses and other current liabilities 1,164,825 1,239 1,458 - 1,167,522 Resident trust liability 135,574 - - - 135,574 Interorganization payables - 488 118 (606) -

Total current liabilities 3,783,251 1,727 1,576 (606) 3,785,948

Long-Term Debt, net of current portion 5,690,009 - - - 5,690,009

Refundable Advances - 518,500 518,500 - 1,037,000

Total liabilities 9,473,260 520,227 520,076 (606) 10,512,957

Net AssetsUnrestricted Designated by Board for endowment purposes 5,327,532 - - - 5,327,532 Designated by Board for Capital Campaign 351,755 - - - 351,755 Undesignated 3,437,703 (109,263) (97,639) - 3,230,801

Unrestricted 9,116,990 (109,263) (97,639) - 8,910,088

Temporarily restricted 106,651 - - - 106,651

Total net assets 9,223,641 (109,263) (97,639) - 9,016,739

Total liabilities and net assets 18,696,901$ 410,964$ 422,437$ (606)$ 19,529,696$


32


Consolidating Statement of Activities

Anja House Aquilla HouseTemporarily Permanently Eliminating Consolidated

Year Ended June 30, 2016 Unrestricted Restricted Restricted Total Unrestricted Unrestricted Entries Total

Support and RevenueMediCal revenue 10,277,759$ -$ -$ 10,277,759$ -$ -$ -$ 10,277,759$ San Diego Regional Center 7,602,800 - - 7,602,800 - - - 7,602,800 Investment return 11,568 - - 11,568 - - - 11,568 Contributions 107,747 109,097 121,656 338,500 48,610 44,110 (30,500) 400,720 Contributions related to capital campaign 496,070 - - 496,070 - - - 496,070 Contributions related to special events 161,153 108,534 - 269,687 - - - 269,687 Special events 116,337 - - 116,337 - - - 116,337 HUD rent - - - - 44,550 48,164 - 92,714 SPA administrative income 124,152 - - 124,152 - - - 124,152 Grants 1,000 123,462 - 124,462 - - - 124,462 Other Income 24,013 - - 24,013 15 9 - 24,037 Net assets released from restrictions,

satisfaction of program restrictions 289,539 (289,539) - - - - - -

Total support and revenue 19,212,138 51,554 121,656 19,385,348 93,175 92,283 (30,500) 19,540,306


Residential 11,942,417 - - 11,942,417 107,144 103,240 - 12,152,801 Community living and respite 4,248,592 - - 4,248,592 - - - 4,248,592

Supporting servicesGeneral and administrative 1,805,675 - - 1,805,675 - - (30,500) 1,775,175 Fundraising

Other 396,822 - - 396,822 - - - 396,822 Special events 195,656 - - 195,656 - - - 195,656

Total expenses 18,589,162 - - 18,589,162 107,144 103,240 (30,500) 18,769,046

Change in net assets 622,976 51,554 121,656 796,186 (13,969) (10,957) - 771,260

Net assets (deficit) at beginning of year 9,116,990 106,651 - 9,223,641 (109,263) (97,639) - 9,016,739

Net assets (deficit) at end of year 9,739,966$ 158,205$ 121,656$ 10,019,827$ (123,232)$ (108,596)$ -$ 9,787,999$


Home of Guiding Hands Corporation

33


Consolidating Statement of Activities

Anja House Aquilla HouseTemporarily Eliminating Consolidated

Year Ended June 30, 2015 Unrestricted Restricted Total Unrestricted Unrestricted Entries Total

Support and RevenueMediCal revenue 9,762,384$ -$ 9,762,384$ -$ -$ -$ 9,762,384$ San Diego Regional Center 6,513,964 - 6,513,964 - - - 6,513,964 Investment return 65,543 - 65,543 - - - 65,543 Contributions 171,865 73,610 245,475 43,210 46,208 (27,198) 307,695 Contributions related to special events 174,914 61,541 236,455 - - - 236,455 Special events 95,892 - 95,892 - - - 95,892 HUD rent - - - 45,804 43,981 - 89,785 SPA administrative income 32,251 - 32,251 - - - 32,251 Grants 1,000 516,076 517,076 - - - 517,076 Other Income 17,695 276 17,971 13 9 - 17,993 Gain on sale of property and equipment 2,732 - 2,732 - - - 2,732 Net assets released from restrictions,

satisfaction of program restrictions 721,350 (721,350) - - - - -

Total support and revenue 17,559,590 (69,847) 17,489,743 89,027 90,198 (27,198) 17,641,770


Residential 11,749,806 - 11,749,806 99,810 101,108 - 11,950,724 Community living and respite 3,413,433 - 3,413,433 - - - 3,413,433

Supporting servicesGeneral and administrative 1,641,695 - 1,641,695 - - (27,198) 1,614,497 Fundraising

Other 252,347 - 252,347 - - - 252,347 Special events 203,849 - 203,849 - - - 203,849

Total expenses 17,261,130 - 17,261,130 99,810 101,108 (27,198) 17,434,850

Change in net assets 298,460 (69,847) 228,613 (10,783) (10,910) - 206,920

Net assets (deficit) at beginning of year 8,818,530 176,498 8,995,028 (98,480) (86,729) - 8,809,819

Net assets (deficit) at end of year 9,116,990$ 106,651$ 9,223,641$ (109,263)$ (97,639)$ -$ 9,016,739$



34


Supplementary Awards Information


Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards To the Audit Committee Home of Guiding Hands Corporation and Affiliates El Cajon, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the consolidated financial statements of Home of Guiding Hands Corporation and Affiliates (the “Organization”), a nonprofit organization, which comprise the consolidated statement of financial position as of June 30, 2016, and the related consolidated statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 28, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered the Organization’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s consolidated financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization’s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of consolidated financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Diego, California September 28, 2016


Independent Auditors’ Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance To the Audit Committee Home of Guiding Hands Corporation and Affiliates El Cajon, California Report on Compliance for Each Major Federal Program We have audited the Home of Guiding Hands Corporation and Affiliates’ (the “Organization”) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Organization’s major federal program for the year ended June 30, 2016. The Organization’s major federal program is identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the Organization’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the Organization’s compliance.

Opinion on Each Major Federal Program

In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2016.

Report on Internal Control Over Compliance

Management of the Organization is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. San Diego, California September 28, 2016


Consolidated Schedule of Expenditures of Federal Awards

Year Ended June 30, 2016

40

Federal/Pass-Through Grantor and Program Title

Federal CFDA

Number

Agency or Pass-Through Grantor No.

Expenditures / Loan

Balances

U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities

Program – Project Rental Assistance Anja House – Contract No. CA33Q021002 14.181 N/A $ 23,078Aquilla House – Contract No. CA33Q021001 14.181 N/A 34,540

57,618

U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities

Program – Capital Advance Loans Anja House – Project No. 129-HD026-WDD-NP 14.181 N/A 518,500Aquilla House – Project No. 129-HD025-WDD-NP 14.181 N/A 518,500

1,037,000

U.S. Department of Housing and Urban Development Community Development Block Grant

Facility Improvements at Group Homes for Disabled Adults in the City of El Cajon 14.218 N/A 37,000Facility Improvements at Group Homes for Disabled Adults in the City of Santee 14.218 N/A 13,473

50,473

Total expenditures of federal awards $1,145,091See accompanying notes to Consolidated Schedule of Expenditures of Federal Awards.


Notes to Consolidated Schedule of Expenditures of Federal Awards

41

1. Basis of Presentation

The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”) includes the federal award activity of Home of Guiding Hands Corporation and Affiliates under programs of the federal government for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Because the Schedule presents only a selected portion of the operations of Home of Guiding Hands Corporation and Affiliates, it is not intended to and does not present the financial position, changes in net assets or cash flows of Home of Guiding Hands Corporation and Affiliates. The Home of Guiding Hands Corporation and Affiliates includes loans granted under Supportive Housing for Persons with Disabilities as expenditures of federal awards.

2. Summary of Significant Accounting Policies

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available.

3. Capital Advance Loans

The capital advance loans are draws made by Anja House and Aquilla House to purchase property under capital advance agreements with the U.S. Department of Housing and Urban Development (“HUD”). The loans bear no interest and are not required to be repaid as long as the houses remain available for low income persons with disabilities for a period of 40 years.


and Affiliates

Consolidated Schedule of Findings and Questioned Costs Year Ended June 30, 2016

42

Section 1 Summary of Auditors’ Results Financial Statements 1. Type of auditors’ report issued on whether

the financial statements audited were prepared in accordance with GAAP: Unmodified

2. Internal control over financial reporting: a. Material weaknesses identified? No b. Significant deficiencies identified? None Reported 3. Noncompliance material to the financial statements noted? No Federal Awards 1. Internal control over major programs: a. Material weaknesses identified? No b. Significant deficiencies identified? None Reported 2. Type of auditors’ report issued on compliance for major programs: Unmodified 3. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? No 4. Identification of major programs: CFDA Number Name of Federal Program or Cluster

14.181 Supportive Housing for Persons with Disabilities

5. Dollar threshold used to distinguish between Type A and Type B programs: $750,000 6. Auditee qualified as a low-risk auditee? Yes


and Affiliates

Consolidated Schedule of Findings and Questioned Costs Year Ended June 30, 2016

43

Section 2 Financial Statement Findings None Noted. Section 3 Federal Award Findings and Questioned Costs None Noted. Section 4 Summary Schedule of Prior Year Findings None Noted.

Documents

Home of Guiding Hands Corporation and Affiliates · Home of Guiding Hands Corporation and Affiliates ... financial statements in accordance with accounting principles generally accepted